Generic savings and U.S. health policy: Pulling the federal levers at both ends

By Jim Frederick

Does the Obama administration “get it” when it comes to pharmacy’s vital interests and lowering healthcare costs?

One sometimes wonders. As much as I like the president and many of his ideas and instincts, I’m sometimes stumped by some of the lesser-understood facets of the administration’s health policy, and by the seemingly contradictory sets of priorities promoted by that policy.

Take the fiscal year 2014 federal budget plan released by the White House last week. The president has repeatedly endorsed efforts to cut the nation’s spiraling-out-of-control healthcare costs, and he made those efforts a centerpiece of the Patient Protection and Affordable Care Act health reform law passed in 2010. But that support for smarter, more cost-effective health outlays doesn’t always translate to budgetary planning.

Both the White House and the whip-smart leaders implementing federal health policy through the Dept. of Health and Human Services — including HHS Secretary Kathleen Sebelius; Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services; and Dr. Margaret Hamburg at the Food and Drug Administration — voice support for raising generic drug dispensing rates as a tool to lower federal and state health expenditures. What’s more, they clearly understand what levers are available to the executive branch through agencies like CMS to help bend the health cost curve. But sometimes it seems that the administration’s healthcare policymakers are pulling on both sides of the levers at once.

To wit: the Obama budget for fiscal 2014 includes a proposal to cut Medicaid spending. Perfectly understandable, given the intractable and unsustainable rise in U.S. entitlement program costs. But White House budget planners would do it by lowering the federal upper limits [FULs] for prescription drug reimbursements and cutting Medicaid payments to pharmacies, the most cost-effective components of the healthcare network.

Those cuts could “reduce access to prescription drugs and pharmacy services for Medicaid patients, resulting in increased overall healthcare expenditures,” said the leaders of the chain and independent pharmacy lobbying groups. What’s more, the reductions would primarily hit generic drugs, as reported by Drug Store News senior editor Antoinette Alexander.

Steve Anderson, president and CEO of the National Association of Chain Drug Stores, and B. Douglas Hoey, CEO of the National Community Pharmacists Association, warned CMS in an open letter that the draft FULs would pay pharmacies below their costs for serving Medicaid patients. That, in turn, could force some pharmacies out of the Medicaid program — not to mention undermine the incentive to dispense cost-saving generic drugs.